Chris Christie crosses the Amazon (dot com)

posted at 2:01 pm on June 2, 2012 by Jazz Shaw

Last month we noted that Michigan had joined the list of states where governors and legislatures were wrestling with the issue of lost tax revenue through internet sales. (The “Amazon tax” concept, as it’s come to be known.) Now yet another voice has jumped into the debate and it comes from one of the rising stars of the GOP. Chris Christie has made the move to support the idea of the Marketplace Fairness Act at what may seem an odd time… just as Amazon announced that they will be setting up shop in the Garden State.

Online retail giant Amazon.com plans to build two huge distribution centers in New Jersey, creating what Gov. Chris Christie said today will be 1,500 full-time jobs.

But New Jerseyans intent on buying a big-screen TV or laptop computer should act quickly: Come July 2013, Amazon will start collecting a 7 percent state sales tax — whether or not the sprawling warehouses are built.

“We will now in the state of New Jersey begin collecting sales tax at least from a fraction of the market we otherwise would not have gotten,” Christie said at a Statehouse news conference, adding the deal would also lead to “thousands” of part-time, seasonal and construction jobs.

Amazon and other out-of-state online retailers currently do not collect the 7 percent sales taxes from New Jersey customers that in-state merchants are required to charge. Although residents are supposed to pay the levy when they file their income tax returns, few do.

Regular readers know that I’ve been on the fence about this question ever since the MFA first surfaced, but reading Christie’s comments has highlighted two points for me in a way I hadn’t considered before. First there’s the issue of a “new tax” and the reaction that generally gets from fiscal conservatives. Read the last line of the quoted text again for an important reminder on this. In most of these cases, just as in New Jersey, there was already supposed to be a tax being collected. The theory was that the government wouldn’t collect it, but people would voluntarily report those purchases when tax time rolled around and just send the money in. So how did that work out? When you finish laughing you’ll note that it worked precisely as well as you thought. Nobody did it.

The second, and perhaps more important part, comes from this video of the Governor’s remarks on the MFA. There’s an important distinction between various proposals which have surfaced to tackle this problem, and Christie highlights one of the more important ones. (Remarks come at the 6:27 mark if you want to skip ahead, but the video is full of good information. I’ll embed it below.)

“I just want to make clear…I’ve been working on this issue in my role on the executive committee of the National Governors Association, because it is an important issue to all of the Nation’s governors. I too, along with governors like Governor Daniels and others, urge the federal government and the Congress, in particular, to get behind Senator Lamar Alexander’s legislation to allow states to be able to make these choices for themselves. I think Senator Alexander’s legislation would be a great step forward, in that regard. It would give states options to decide how they want to deal with this and not have to any longer deal with the federal prohibition dealing with it. So, it would allow us to do it in a much more uniform and broader way. So, I’m with Governor Daniels on this and other Republican governors – Governor Snyder of Michigan and others who feel strongly about it.”

(Emphasis mine.) Among different ideas, some of the worst concepts were ones which had me worried that this would turn out to be some sort of federal mandate to collect the tax. (Or worse, have Washington collecting one itself.) If it turned into some sort of de facto federal tax scheme it was dead on arrival. But Christie’s take on it highlights the need for Washington to “get out of the way” and simply allow each state to handle the question of collecting sales taxes on internet sales as they see best. I think that’s something very different.

And besides, don’t forget who is saying this. Christie’s untouchable, so this should seal the deal. Let’s face it… the guy is going to wind up either being President or Emperor of the Holy Roman Empire and ruling the world. Do you really want to cross him?

Here’s the video from above so you can listen to the governor’s remarks and judge for yourself.

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The way I see it, our income has already been taxed…so when we buy something, we get taxed again…makes sense./s

And that’s not even counting the taxes for the trucks when they were bought by the company, the taxes for the fuel put into them, the taxes on the materials of the product itself and its packaging…I’m sure it goes on.

On top of it all is the Federal Reserve Board’s hidden inflation tax.

These politicians anymore are like the Yankee generals who never felt they had enough men to counter the Rebels and asked Lincoln over and over again for more…these clowns never feel they have enough money.

Hey Chris….. I sold a Rolling Stones record I no longer wanted on Ebay to one of your citizens In NJ. My house is on fire right now and Neighbors are looting what’s left. WHEN DO YOU SUPPOSE YOU FIREMEN AND COPS WILL GET HERE.

Who says the playing field needs to be fair in order for competition to occur? Competition is inherently unfair, numbskull.

gryphon202 on June 2, 2012 at 5:35 PM

What are you, 12? Since when did Apple get to set the rules for everyone else? Who gives a sheet what Apple does?

xblade on June 2, 2012 at 11:10 PM

What is with the ad hominem attacks? You do not agree with me say so. Leave the personal insults to lefties and liberals. If two companies are selling the same product but one of the companies is required by a government mandate to charge more how is that competition? I agree with an earlier post that stated get rid of sales tax completely, but thats not going to happen. Internet sales tax exemptions punish small local businesses and give large national online firms a substantial advantage.

It seems like every time I read a post on HA that sounds like a left of center person wrote it, Jazz is the blogger.

The issue is “Los tax revenue” and how to replace it. If you find yourself arguing that either a new or higher tax will do the trick, then you are not fiscally conservative. There are other ways to expend your effort and political capital to resolve the budget shortfalls that you find to be so critical. Exhaust all other options first, then try some more and then retry your retry and then let the lefties argue for higher or new taxes. Then call them out for always wanting to create new or higher taxes. If you Are ” on the fence” about such an approach, you likely aren’t as conservative as you believe yourself to be.

As to the “fairness ” issue. Government did not grant onliners an exemption at the expense of others. The onliners developed, in some measure, because the government hadn’t got around to taxing that method of sales yet. That is quite different from granting tax exemptions to Solyndra at taxpayer expense in an attempt to choose winners and losers. Amazon did not petition the government for special tax status. They created a business model based on existing laws and developed a way to be more efficient. That should be applauded by conservatives. The local retailers that cannot compete, by definition, do not belong in the market. You can have the same business model with no special petition to the government for special status. That implies open and free competition.

To argue otherwise is to argue that TX should be forced to collect state income taxes because CA does and CA is losing residents and businesses to TX as a result. Not fair not fair.

Money drives politicians crazy when they cannot control every cent of it. Look what happened to the Social Security Fund that sat there getting bigger by the day. Comp-pay accounts in NYS are now in the past for the same reason, Cuomo saw the same thing here and is destroying the health benefits to comp-cases. Cuomo’s father took the monies from the hunting and fishing licenses that supported game management projects to build a bridge in NYC and said he borrowed that money from the fund but it disappeared. Want a good laugh read this list aloud, enjoy. http://www.usa.gov/directory/federal/index.shtml

What is with the ad hominem attacks? You do not agree with me say so. Leave the personal insults to lefties and liberals. If two companies are selling the same product but one of the companies is required by a government mandate to charge more how is that competition? I agree with an earlier post that stated get rid of sales tax completely, but thats not going to happen. Internet sales tax exemptions punish small local businesses and give large national online firms a substantial advantage.

Kerbouchard on June 3, 2012 at 12:54 AM

There are no “internet sales tax exemptions,” pseudo. There are only companies that must collect sales tax by law, and those that haven’t been forced to yet. And as for the “ad hominem” attacks, I’m sorry, but if you make a stupid argument, I’m going to call it stupid.

There are no “internet sales tax exemptions,” pseudo. There are only companies that must collect sales tax by law, and those that haven’t been forced to yet.

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Thanks for making my point in a clearer way. My company(Brick and Mortar) is FORCED by law to collect sales taxes. My competitor is being given a competitive advantage by the government to sell the same products to the same consumers at a lower price. “Internet Sales Tax Exemption” is just laziness on my part for a catch all phrase. Although at the dawn of the internet I remember congress making a big deal about staying “Hands off” on taxes and regulation for the internet so it could grow. My preference would be no sales taxes. My other point was that government(state and local) Going after sales tax revenue from online retail companies might help brick and mortar companies. Just a viewpoint from someone in the trenches of retail that quite a few brick and mortar business owners see this as a leveling of an artificially(government) uneven playing field.

I buy a fair amount from Amazon, as well as other online retailers. I have to pay shipping for almost every purchase. That makes the cost very close to the same as, or more, if I’d bought it locally with sales tax. Now add on that sales tax and the items will cost even more, giving the local retailers the edge. You level the playing field on one side and you unlevel it on the other. The main reason I buy online is because I don’t have the time to physically search all of the stores all over town to see if they carry not only the exact item I’m looking for but if they’ve even got something close to what I’m looking for. Try finding the variety available online in your town. Good luck with that. All this will do is make the items I can’t find in my town even more expensive. Which begs another question, will that cause the online retailers to raise prices to cover the admin costs of collecting taxes or even just because they know they have a captive audience? UPS, FedEx and USPS will take hits too when people stop buying online due to the increased costs. My buck is streched far enough as it is now.

Amazon will be obligated to collect sales taxes if they build distribution centers in NJ because they will have a brick-and-mortar presence in the state. I believe MFA is an attempt to make internet retailers liable for sales taxes when they have a CUSTOMER in that state. It’s not the same thing.

You just don’t get it, do you? I can brook ignorance, but I can’t handle people who are obstinate in their ignorance. If the problem is that government is “artificially making the playing field uneven,” the solution is NOT new laws passed and MORE government intervention in the name of some nebulous idea of “fairness.” Less tax. Less government. Less tyranny. NOT MORE!

Amazon will be obligated to collect sales taxes if they build distribution centers in NJ because they will have a brick-and-mortar presence in the state. I believe MFA is an attempt to make internet retailers liable for sales taxes when they have a CUSTOMER in that state. It’s not the same thing.

Heywood U. Reedmore on June 3, 2012 at 2:34 PM

And thus we come to the million-dollar question: Why would Chris Christie knowingly pass a law to mandate something that has driven Amazon.com from doing businesses in other states? New Jersey gets precisely jack in sales taxes from a business that doesn’t do business there at all, and that’s where this is headed.

Try actually operating a business in an artificially skewed competitive market. I DO NOT WANT MORE GOVERNMENT INTERVENTION. It is already there. It was on observation that local governments collecting sales taxes from internet retailers MIGHT not be a completely bad thing. I am making an observation from someone who operates a small business, in this market in this economy(which sucks). I talk to other people like me who operate businesses like mine who are frustrated by the government favoring big businesses over small businesses. I make my yearly donations to the NFIB. I fight my local government over sales taxes, property taxes(own my building) contribute to campaigns of local politicians that are pro business. What do you do to fight back aside from insult other conservative posters on message boards?

Actually, Amazon chose to open a distribution center in NJ knowing it would make them liable to collect sales taxes in that state under existing law. You’ll also note the Amazon rep supports MFA. Perhaps they believe it will give them a competitive advantage compared to smaller online retailers for whom the added requirement will be too costly.

My guess is Christie supports MFA because it eliminates the advantage states with no income tax have in attracting online retailers to build facilities and offices in their states. If you’re an online retailer located in Texas, you don’t have to collect any state sales taxes. Under MFA you will, which eliminates an incentive to build in Texas. It’s an example of less competitive states trying to make their competitors less competitive rather than making themselves more competitive.

Actually, Amazon chose to open a distribution center in NJ knowing it would make them liable to collect sales taxes in that state under existing law. You’ll also note the Amazon rep supports MFA. Perhaps they believe it will give them a competitive advantage compared to smaller online retailers for whom the added requirement will be too costly.

My guess is Christie supports MFA because it eliminates the advantage states with no income tax have in attracting online retailers to build facilities and offices in their states. If you’re an online retailer located in Texas, you don’t have to collect any state sales taxes. Under MFA you will, which eliminates an incentive to build in Texas. It’s an example of less competitive states trying to make their competitors less competitive rather than making themselves more competitive.

Heywood U. Reedmore on June 3, 2012 at 6:07 PM

There’s more than one way to look at this, I guess. I didn’t realize that Amazon had recently opened a distribution center in New Jersey. But what about if Amazon ships into New Jersey from an out-of-state distribution center? And what if Amazon just stops doing business in New Jersey altogether? They’re under no obligation to ship there at all. And yes, I am aware there is a “use tax” in many states that goes largely unenforced.

I’m telling you as a principled conservative, I believe that principled conservatives are right to be suspicious about such measures. I don’t see it going anywhere if passed except becoming a jurisdictional clusterfark that will cost the people of America more money and more liberty than they already give up in the name of institutional “fairness.”

Holy cow, do all you people who claim to be conservative actually believe that government should not tax anyone? You must have graduated from the same economic school as most libs, just on the Gun-Owner track, instead of the Patchouli track.

Listen, government requires a certain amount of revenue to do the things that we actually think it should be doing – police, fire, roads, some parks & rec at the local level; militia added at the state level; and national defense and commerce at the federal level. This takes $$$. In order to get those $$$, they tax their constituents.

Yes, you get taxed in multiple ways – there are multiple levels of taxation at work. I get taxed on my house and my car by the local government, as well as sales tax. I get taxed on my income and my car and with sales tax at the state level. I get taxed on my income (and with the payroll tax, yes) at the national level. You can argue that there should be some measure of streamlining in these taxes, but you can’t realistically argue that none of them should exist.

Sales taxes are useful to a government because they tap directly into the ecnomic engine for the revenue – the better their constituency does economically, the better they do. And, that’s fair, up to a point. (Income tax does this, as well, with the problem of defining “income” – exclusion of interest and dividends, for example.)

The question becomes one of a “level playing field” across the economic spectrum. Local governments see this working when there is a disparity in sales tax within a short distance – the place with the lower sales tax sees an increase in economic activity, with a lot of it displaced from the locale with the higher tax.

Unfortunately (to some), this is what is happening in many places with internet sales. There is some displacement of economic activity from one locale (local b&m stores) to another (internet stores) because of a disparate tax treatment. Note: this is a disparate tax treatment – one store is being treated differently from another store. There is a rationale for this – the internet store is not a physical presence within that local area (state, usually) to which the buyer travelled to make the purchase.

The question is, is that enough of a rationale? Does it impact the businesses in such a way that they are not equal under the law?

For reference, b&m businesses that do business in different places have huge departments that handle the taxes for the different states and counties and cities. A local company only has to hire a local CPA to handle his taxes. There is no unequal treatment there, merely the trade-offs of growing your company beyond local business. Large online companies already have these large tax departments to handle the state taxes in which they do have a physical presence. The real difficulty is for the small online business that only has one physical presence, but ships their unique product all over the place to internet customers.

There is a smart way to solve this dilemna, reducing barriers to entry for the small business and keeping costs down for the large ones: Charge sales tax at the point at which the actual product enters the transaction. This means a physical object gets charged at the warehouse/business from which it ships, and a download gets taxed at the location of the server from which it is downloaded.

This means that large internet retailers merely shift their charging mechanisms slightly, and the local business can continue doing what he does, with little change. It leaves usage taxes up to the state where the purchaser is resident (and to the resident to ignore said usage taxes). It means that the place that is the actual economic engine is the one that benefits from said economic activity. And, it treats all businesses equally.

(Just for additional reference, any shipping you are paying re the internet retailer – for most products produced somewhere other than your area – is built into the price when you buy at the b&m store. It might be lower, if the local b&m can buy in enough bulk to get trucking rates, instead of shipping individual boxes through UPS/FedEx.)

note to HA tech management: GET RID OF THE STUPID AUTOREFRESH ON THE INDIVIDUAL PAGES, DANGIT!

I was talking about his original ad hominem attack, that is a leftist tactic. Make a sputtering incoherent talking point answer and finish with a personal insult. Last open enroll sure did lower the over all politeness and intelligence quotient on Hot Gas.